More risk factors in VVUS' 10-Q on Qnexa

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=7238278-301188-514052&type=sect&dcn=0001104659-10-026546

In addition, the placebo rate in larger studies may be higher than
expected.

Although we believe Qnexa affects the two major causes of overeating, excessive hunger and the inability to feel satisfied, we may not be correct in our assessment of the
impact the combination of these two ingredients may have on weight loss or their mechanism of action.

In general, significant adverse events and side effects observed in pre-clinical, clinical and post-marketing studies are included in the full prescribing information or label for each drug. The label for TOPAMAX contains reports of side effects, warnings and precautions including metabolic acidosis, acute myopia and secondary angle closure glaucoma, decreased sweating and hyperthermia, cognitive-related dysfunction, psychiatric and behavioral disturbances including one completed suicide in a patient during a bipolar trial, somnolence and fatigue, sudden unexplained death in epileptics, kidney stones, paresthesia and various drug interactions. The label for ADIPEX, a popular branded form of phentermine, contains warnings and precautions including recommendation against coadministration of phentermine with other drugs for weight loss. Adverse side effects include, among other things, pulmonary hypertension, valvular heart disease, drug abuse and dependence, overstimulation, restlessness, dizziness, insomnia, euphoria, dysphoria, tremor, headache, dryness of the mouth, diarrhea, constipation, impotence and changes in libido.

In addition, if the FDA does not approve the full-dose of Qnexa, there is no assurance that they would approve the mid-dose or any other dose of Qnexa.

If we are required to complete a long-term cardiovascular safety outcomes study for Qnexa, the ultimate approval may be delayed for several years and the overall cost of the program will significantly increase.

In June 2007, an FDA advisory panel recommended against approval of rimonabant, an oral obesity treatment targeting the CB1 receptor system being developed by another company. Rimonabant was a centrally acting drug that reduces patients’ desire to eat. The advisory panel expressed concerns about the impact of the drug on depressed patients and also expressed concerns about patients having thoughts about suicide. In addition, concerns about rimonabant’s mechanism of action and interference with the CB1 receptor pathway were also voiced. The company withdrew its NDA for rimonabant shortly after the advisory panel meeting. Although the active ingredients in Qnexa have been previously
approved by FDA at higher doses for other indications, it is a centrally acting drug that may increase the risk of psychiatric side effects such as depression and/or suicidal ideation.

Does VVUS even understand Qnexa's mechanism of action?

Reading all the risk factors for Qnexa in their 10-Q is like watching a horror movie. VVUS has no marketing partner, and no manufacturing facilities. No way it gets approved in October, in my opinion.

See disclaimers in the side bar.

Disclosure: no position in VVUS.

ARNA reaches another milestone

One of Arena Pharmaceuticals' compounds just passed another milestone, completing Phase I clinical trials for type 2 diabetes mellitus patients.


http://clinicaltrials.gov/ct2/show/NCT00871507

Johnson and Johnson is the big pharma partner completing the clinical trials. Arena will receive milestone payments as well as a royalty split upon commercialization of the drug compound.

This is more evidence that ARNA has a strong drug pipeline beyond just Lorcaserin.

Biotechs and the FDA

In a letter I wrote to a friend and fellow investor:

Dick,

I like your synopsis on the disconnect between pivotal event-driven biotech stocks and the overall market (which is driven by consumer demand to the tune of 70% of our economy).

One thing I would add on the 20% success rate of FDA approval--I believe that is for drugs that enter into clinical trials--all 3 phases. I believe once a drug reaches Phase III clinical stage, the probability of approval is between 50-80%, depending on who you talk to. So if we stick with Phase III drugs, our chances of approval greatly increase, because at that stage, they are toying with dosages, and hopefully, most of the safety and efficacy issues are already ironed out.

We know the cycles for biotechs are sometimes greater than 10 years. In semiconductors, product cycle times are in the months, so investing in Phase III biotechs is necessary for the impatient (which we all are). It's been said that scientists have to discover 360 molecule compounds for every approved drug, due to the high failure rate. This ratio takes into account research and development, multiple phases of clinical trials, new drug or biologic application, FDA approval and commercial launch. Each step carries potential attrition risk.

There's another reason why I like ARNA--their patent portfolio is strong so that if other pharma companies want to target a particular malady relating to the central nervous system, metabolic systems, cardiovascular, and inflammatory diseases, chances are they will need to license one of ARNA's compounds. Dr. Behan has found a way to selectively target G Protein-Coupled Receptor's (GPCR) for their desired effect. The selectivity is what makes ARNA so valuable, as it doesn't stimulate other receptors, and therefore adverse side effects are minimized. This sounds trivial, but it's the difference between a few billion dollars in annual revenue and $21 billion of lawsuit claims that Wyeth had to pay out, due to cardiac valvulopathy from the failed phen-fen 12 years ago. It's also why I think ARNA will win out over VVUS and OREX, even if their offerings are approved also.

I really want multiple partnership deals, and not an outright buyout from a big pharma. The pps will soar if ARNA remains independent.

Greg

Swine flu revisited

In the bad news, good news category:

Bad news first: the swine is spreading rapidly, despite declining media coverage.

Good news: my two swine flu plays are doing well.

HEB has a history of FDA non-approvals, but is expecting a PDUFA decision from the FDA any day now, for approval of treatment for Chronic Fatigue Syndrome (CFS). CFS's acknowledgment as an official indication itself is controversial, and thus there are no current approved treatments for it. That's why HEB's Ampligen has so much potential, as patients and doctors in clinical trials swear by it. After being barely able to function, some patients on Ampligen have their lives restored.

But Ampligen is also being reviewed in Japan, Italy, and Australia (among other countries) for use as an adjuvant with vaccines to combat season flu, avian flu, and swine flu. Apparently, Ampligen in conjunction with other vaccines shows clinically significant efficacy.

I have sold 40% of my HEB holdings, locking up to 100% gains, and letting the rest ride in case they get approval for CFS. Any orders from the increasing threat of rising flu cases will provide further upside in the price per share.

BCRX is developing an anti-viral (vs. a vaccine) which shows efficacy in reducing symptoms for those with severe flu symptoms. Roche's Tamiflu is largely ineffective against some mutated influenza strains and GSK's Relenza has also been marginalized against resistant strains. BCRX's Peramivir intravenous dosage has been so effective against multiple flu strains in clinical trials that they are being evaluated for Emergency Use Authorization (EUA) despite not being FDA-approved (currently Phase II).

In Japan, they are in Phase III with fast-track approval targeted for 2010. Shionogi, their marketing partner, is working furiously to get approval in China, South Korea, Taiwan, and Hong Kong as well. East Asian countries are far more sensitive to influenza due to close living quarters and an aging population in Japan, which increases mortality and morbidity.

I believe WHO will raise the pandemic alert to Phase 6--the highest level soon. Despite the swine flu's rapid spread, confirmed cases are being under-reported for various reasons, whether political or just lack of testing facilities. For now, the H1N1 virus has been proven virulent, if not as lethal as its avian flu cousin (H5N1). But if they somehow mutate these winter seasons in the southern hemisphere, and then later in the northern hemisphere, we could have a strain that is both virulent AND lethal.

These are highly speculative investments, and these are not recommendations. Please do your own due diligence.

Disclosure: I am long BCRX and HEB.

Is the swine flu scare over?

Apparently not, as the World Health Organization (WHO) is contemplating raising the pandemic alert from phase 5 to phase 6, the highest level. The Influenza A(H1N1) virus is rapidly spreading throughout multiple countries, and is now mutating to the point where there is human-to-human transmission. Roche's Tamiflu and GSK's Relenza are stockpiled in the US, but Tamiflu is potentially ineffective against new mutations, and Relenza may only be marginally effective in combating the virus.

Hence, I invested in another clinical company which has developed a vaccine which has been proven effective in Phase III and Phase II trials in Japan and the US, respectively. They already have existing contracts with government agencies, and negotiations are underway to roll out doses for hospital use and for stockpiling. Unfortunately, this swine flu pandemic is not going away any time soon.

Shares of DNDN halted in after hours trading

Dendreon, a Seattle-based biotech specializing in cancer immunotheraphy, will be announcing top-line results of a phase III clinical trial for Provenge tomorrow. The pivotal metric is whether patients with prostate cancer will have a 22% survival benefit from Provenge vs. the place control group.

An advisory panel gave a recommendation to the FDA of approval in 2007 based on a positive safety profile and promising interim survival benefits. But in a controversial move (especially for life-threatening oncology treatments), the FDA did not approve Provenge, seeking more results for this IMPACT clinical trial.

The results will be announced tomorrow in a conference call at 6 am PT. If Provenge meets its 22% survival benefit benchmark, the share price for DNDN will explode. If they miss their target, the share price could collapse to almost zero. Such is the life of a biotech microcap company.

If IMPACT proves effective, it could open the doors for immunotheraphy of other cancers, and could be a game-changer for oncological treatment. For investors and patients, let's hope this one is a winner.

Due Diligence

In this environment, there's not much to be excited about in the stock market. I'm hearing many aren't even opening up their 401k statements, knowing they're down over 50% from their 2007 peak levels, and knowing they've been declining for months on end.

I believe we haven't reached a secular low in this bear market yet, but I do believe when we do reach it, it will be the buying opportunity of a lifetime. In between, we may even experience violent bear market rallies, but the trend is still down.

It just doesn't feel like a bottom, because so many are trying to find it. Stock market bottoms usually aren't reached until the last bull has thrown in the towel. I don't think we're there yet.

Yes, some stocks are cheap, but they could get cheaper. Investors with a very long-term horizon (10+ years) will probably do well buying at current levels, and if the fear is missing the train, perhaps nibbling at solid companies with cash flow, dominant market share, and low debt levels may be tempting. But this falling sword isn't done falling yet.

Meanwhile, aside from precious metals, the only promising sector I see is biotech, as they look increasingly enticing as acquisition targets. Big pharma companies face daunting challenges going forward, as their pipelines are depleted and at risk of being decimated due to patent expiration. Pfizer will acquire Wyeth, and Merck is paying over $41 billion for Schering-Plough. Genentech is mulling over Roche's higher bid of $95 per share. Expect to see more mergers and acquisitions activity.

I've placed bets on a biopharmaceutical company that will announce results of Phase III clinical trails by the end of this month. It's a calculated speculation--if results are negative--either due to lack of efficacy or safety, it'll drop by 50%. However, if results are positive, it will triple. If a partnership agreement is offered to co-market the drug, it should double again. And if an outright buyout offer is made, it'll double again. I like that reward/risk profile.

I performed heavy due diligence on the company: no insider selling, phase I and II trials results, manufacturing facilities, preliminary feedback, competitive analysis, marketing partners, history, fundamental analysis, subjective analysis and technical analysis. All indicators look good, but with biotech, the odds are indeed against success. Volatility is high. In other words, biotech investing is not for the faint of heart. It can be disastrous, but it can also be extremely rewarding--both for investors and health patients. Good luck to all longs.

Snow in California and slippery slopes

I drove down I-5 thru the Grapevine, where we got tons of snow yesterday. I actually pulled over at a rest area to throw a bunch of snowballs (at trees, not people). It was the most fun I've had in a while, but my hands got really cold, and all I had on was a t-shirt.

Then as I descended upon the Valley, the full moon was shining brightly against a backdrop of some clouds. It was as clear an evening as I ever remember in LA. The rain must have cleaned out the smog temporarily. Traffic was light, probably due to the tattered economy.

The City of Angels really is beautiful when you can see all the lights against the hills. It made the long drive more bearable.

It was a good day, as the biopharma company was up big again, with CNBC now reporting it in New York at the biotech conference. I got in at $4 last week, and it closed above $6 today. If Phase III trials are positive, it'll double from here. If they're negative, it'll collapse back to $4. We'll know next month. Biotech investing is a slippery slope--it can be dangerous as most drugs in clinical trials fail, but when they hit, it's a beautiful thing. Kinda like LA.

Next up is a melanoma drug company, with results due in the 2nd quarter. People afflicted with this aggressive cancer can't wait--there hasn't been an FDA-approved drug in 30 years. It's do or die. Which makes this play dicey for investors, but more importantly, patients really need some positive news.

The government's stimulus plan should include investments in biotech and stem cell research--that's where the new frontier is. We need to find cures for these terrible diseases. A lot more than we need more frisbee golf courses.